Afterpay; Financial Angel or Debt Devil?
Afterpay has grown in popularity and availability in the last few years with many companies offering this payment option either online or in store. Afterpay gives you the ability to buy your item immediately but pay only a quarter of the cost up front. The remaining payments are spread over the next 6 weeks, so it makes buying larger tickets items and full shopping carts much more appealing but is it all it is cracked up to be? Let’s talk about the pros and cons of afterpay for you, the consumer.
The biggest pro is obviously that you get the instant gratification of being able to buy your item right away. Paying only a quarter of the cost and being able to own the item/s immediately is very appealing. Paying off a lay by requires patience and consistency and with Afterpay, the hard work is done for you. Not only do you get to own your new things sooner, Afterpay works out the cost for you and automatically takes the remaining payments at bi-weekly intervals. No need to remember to go to a store and decide how much to pay off your lay-by, everything is done automatically. Another huge asset is that is it almost ubiquitous now in that it is being offered by more and more retailers on more and more items. Unlike a regular personal loan, Afterpay is very easy to set up and even easier to use. With some basic information such as your phone number, email, address and payment info (credit card/debit card) you can set up an account in minutes and be shopping.
Another big tick in the Afterpay column is that there are no fees associated with setting it up and no interest is charged on your payments. As long as your payments clear (i.e. your account has enough money to satisfy the bi-weekly amount due) then you will never be charged a late fee. If you don’t like to use your credit card, Afterpay gives you the convenience of that sort of transaction without the added cost of interest so if you are budget conscious, this is a big pro for you. So far so good right?
If you are budgeting or trying to curb unnecessary or reckless spending, Afterpay makes it much easier to justify a purchase. Having smaller amounts coming out over time may seem to make something more “affordable” but the question that must be asked is, if you cannot afford to pay it in one lump sum, is it really a purchase you should be making? Afterpay quite simply, makes it seem easier to spend money and even though there is no interest on the purchase, due to the ease of use and the availability, we might find ourselves justifying extra purchases that we might not ordinarily make. It makes impulse spending much easier and over time, needless purchases will stack up so it’s always a good idea to think of your budget before engaging in any purchase.
Afterpay can also limit the amount of money you are able to spend. If you have bought things using Afterpay and made your payments on time, chances are, over time, you will be able to spend larger amounts using the service. If you are not able to make your repayments, Afterpay can limit the spending amount available to you as a result. Whilst there are no fees to set Afterpay up, if you miss a payment or a payment is late, you will be liable for a fee. If your payment is unsuccessful, you will be hit with a $10 fee and if that payment is not reconciled within 7 days, you will be charged another $7. Basically, you need to ensure there is enough money in your account or on your credit card for the payment or you’re going to get stung with fees and that “great” deal suddenly becomes a liability.
Sometimes (not always), Afterpay will require a credit check before approving you. As long as you are 18 and have the information we talked about before, the approval process is usually fairly smooth however the terms and conditions do say that the company or other third parties may choose to do a credit check on you before approval. Using Afterpay will not affect your credit score but there are similar companies to Afterpay that may have an impact on your credit rating. If you would like to see which buy-now-pay-later companies do affect your credit, you can look here.
Another potential downside is of course the financial management side of things. If you currently struggle to keep track of your credit cards and your spending on them, Afterpay may not be for you. Using Afterpay, you can link your credit card to your account thus making frivolous spending easier and tracking your purchases/spending, harder.
So, there you have it, everything you need to know to be a conscious and educated user of Afterpay. There are many upsides to using the service and, if managed properly, it is a fantastic option for a lot of people. Always bear in mind your spending habits and your budgeting goals and be sure to weigh up the need for the purchase vs the want of the item. If you struggle to keep on track with your spending, then Afterpay may not be the best option for you.
If you would like to know more about managing your credit or if you are experiencing financial distress, a credit mediator can contact your bank/lenders and negotiate on your behalf. Laurence, at Credit Mediation Service Pty Ltd is an expert in his field, having helped so many Australians regain control over their debt. In 24 hours, your case will be reviewed and qualified and within 3 weeks, your debt could be reduced by more than half. Credit Mediation Services offer a no win, no pay policy so there really is nothing to lose.
This article should not be considered legal advice, but as a general guide only. If you are facing legal recovery action, please consult a legal attorney to assist you. For further information on how to have your debts cut by half or more through a specialist negotiator, reach out to us on [email protected] or contact us on 1300 490 030.